Sunday, September 30, 2018

Entrepreneurs have always believed that their product or service must show real value to customers, but today the smart ones are even able to make their marketing valuable. The days are gone when marketing was all “pushing product.” Now customers seek out people who are willing and able to add value, with expertise and insight, even before they have a product.

This new approach is often called “pull marketing,” where the idea is to establish a loyal following and draw customers to your content, and eventually your solutions. Customers don’t even see this as advertising. For example, top bloggers today, including Rand Fishkin and Gary Vaynerchuk, find no need to advertise, as customers come to them for value from content alone.

The impact of the right marketing content, and the principles of providing it today are outlined well in a classic book, “Content, Inc.,” by the so-called godfather of content marketing, Joe Pulizzi. He provides details on six key principles that every entrepreneur needs to practice in building and executing any modern successful startup:

Fill a need independent of your product or service. For example, Seth Godin’s daily articles online on marketing are so valuable that he pulls loyal customers without ever mentioning his publishing services, consulting services, or speaking engagements. Make your content answer some unmet customer need or question without pushing a product.

Consistently deliver new and valuable content. The key is consistency. Startups that haven’t updated their website since rollout, or publish a new blog once a month or less, won’t be followed for valuable content. In this context, content is like advertising, unless customers see you every day, they won’t remember anything about you, good or bad.

Customers relate to other humans and relationships. As a startup, you the entrepreneur are the brand. Customers like to think they know you, so you need to find a voice, and share it. If you have a story, share that too, and invite interaction and comments. It’s more true than ever that people buy from people, not companies.

Value is in your point of view. Everyone knows how to use Wikipedia, universities, and textbooks for facts and history. Experts and advisors offer new value from their insights, opinions, and experience. Don’t be afraid to take sides on matters that can position you and your company as an expert. People appreciate that, and come back for more.

Avoid “sales speak” and pushing your product. The more you talk about your solution, the less people will value your content. Pulizzi has measured that page views drop quickly by as much as 75 percent on self-serving content. Skip the flowery phrases and frequent adjectives that make up so much of the advertising copy we all recognize.

Demonstrate best of breed through actions. Although you might not be able to reach it at the very beginning, the goal for your content is to be best of breed in your chosen domain. This means that, for your content niche, what you are distributing and your recommendations are the very best of what you and other experts have found.

Pulizzi argues, and I agree, that great content can be used by entrepreneurs to build an audience of potential customers first, before you have a product to sell. It’s the smartest and least expensive way to test the value of your concept, as well as the potential makeup and size of your target customer set. You then have the opportunity to monetize an already loyal following.

By experimenting with content, every entrepreneur can explore their own sweet spot, where they can comfortably offer value to an interested customer set. They can find their personal tilt that sets them apart, build a base of followers as a foundation to a business, and then harvest the audience for diversification and monetization.

What we call “marketing” has changed from a focus on “selling” customers with push marketing, to a focus on providing value early and in every way possible, such that customers are drawn to you as a trusted provider of value. That’s the loyalty you need, to have them recommend you to their friends, and keep you ahead of the many competitors easily visible on their radar.

Saturday, September 29, 2018

Cash flow is a basic survival metric for every startup. Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall. Don’t wait until you are almost out of cash before managing every dollar spent, or looking for the next refueling from investors. Desperate entrepreneurs lose their leverage and die young.

It doesn’t take a financial genius to recognize that you need to keep your burn rate low. Yet it always amazes me that I can find two different startups, seemingly working on the same problem, with one having a burn rate several times higher than the other. Of course, their answer is that the second intends to get to market faster, but every engine has limits regardless the fuel applied.

If your runway is less than a year, it’s time to either begin looking for a new cash infusion or defining and implementing a Plan B to assure survival. Your goal is that magical breakeven point and hockey-stick profit-growth curve. Raising money from professional investors, even friends and family, takes time. Count on six months from beginning the funding process until a new check is cashed.

As a mentor to many entrepreneurs and startups, here are my best recommendations for keeping the burn rate low, planning ahead and maintaining credibility with investors:

Manage cash flow personally every day. A big influx of orders may feel like success, but can kill your business if you don’t have the cash to produce, deliver and wait for payment. The best entrepreneurs manage cash flow ruthlessly and never delegate decisions about spending money. Cash flow out equates to burn rate, and the runway depends on your reserves.

Buffer your projected resource requirements. You will make mistakes. Things will cost more than you expect. Always add 20 percent to your best estimate of funding requirements when approaching investors. They understand startup realities. Better to ask for more early. Going back to investors for more money ahead of the plan is high in terms of credibility and leverage.

Use future cash for payments where possible. Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. Think of these alternatives as paying interest on a loan, and manage them wisely.

Be a miser with contract services and facilities. One of the main reasons that former corporate executives often fail as startup CEOs is that they expect a big office and an entourage of expensive professionals to do the real work. Cash flow can be drastically reduced by working out of your garage. Tackling most of the support tasks yourself.

Use social media for early marketing. Hire a professional marketing and public relations agency once you have a good revenue stream but you don’t need them to start a free blog, establish Facebook and Twitter accounts with initial content and complete the basics of search engine optimization. Social media is not rocket science.

The timing of cash flow is everything. Waiting until you have something to sell before bringing on a sales and operations staff. Getting a sales contract before manufacturing inventory. Match your office, facilities and computer equipment to the size of the staff you have today, and intend to have in the next six months.

As a rule of thumb, your monthly burn rate should be less than 10 percent of your last funding raise or starting cash in the bank. For example, a software development startup raising $250,000 from angel investors better be able to operate on $25,000 per month. This could equate to two technical founders (with a minimal salary), funding two developers for a year.

In this case, the primary cash outflow would be for product development and operating expenses, with potentially enough runway to build the initial product, get a patent, attract some early adopters, and build the initial revenue stream. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Overall, managing cash flow and burn rate is more critical to your business success than having the right idea and the right product. It’s why most investors proclaim that they invest in people, more than the idea. If you adequately manage your burn rate, your startup is much less vulnerable to flaming out before you get to that elusive break-even point.

Friday, September 28, 2018

One of the big differences between an entrepreneur and an employee of a big business is that employees tend to have a very narrow focus on their job, while entrepreneurs have to keep the broader focus on business. Both want personal satisfaction and financial success. In fact, U.S. entrepreneurs consistently claim to be happier, and have a higher net worth than employees.

In my advisory role to businesses of all sizes, I have personally found that you don’t have to be an entrepreneur to act like one, and enjoy the result. No matter what your role or level as an employee, if you can keep the big picture in perspective, you will do better in your career, get more positive feedback, advance more rapidly, and get the pay raises you desire more often.

Acting like an entrepreneur isn’t a trait that you have to be born with – it’s really a mindset that anyone can adopt and hone with practice. There are some key strategies I recommend in developing that mindset, whether you are currently and employee or an aspiring entrepreneur:

Keep the business customer at the top of your pyramid. Every business depends on customers to thrive, and every employee role has some correlation to customer satisfaction. Corporate employees often think only about their narrow silo, their workload, and view customers as someone else’s problem. This disconnect will kill your career.

Maximize your impact on the success of the company. Entrepreneurial thinkers always think and act like they own the company. Unfortunately, recent surveys show that almost 70 percent of employees feel very little engagement with the business. It’s time to relate every task you do to the success of the business, or fight to eliminate the job.

Fight for change to improve revenue and lower costs. Too many employees fight change, perhaps because it requires new thinking. Entrepreneurs see change and new technology as the way to attract more customers, and improve sales and profitability. If you find yourself clinging to “the way it has always been done,” it’s time to think again.

Focus your role on solving the customer problem. Every employee and entrepreneur needs to understand the customer value proposition. For example, if you are in marketing, forget the number of features, and highlight the value of the whole compared to the cost. The ideal customer will see so much value that price becomes unimportant.

Know your peers and build your competitive advantage. Entrepreneurs realize that competitors are outside businesses, not other people in your department or other organizations in your company. To improve your career, you need to look outside for ways to benchmark your position, and find ways to constantly improve your skills.

Treat your career like a business model open to pivots. A career plan is like a business model, and entrepreneurs realize that every plan has to be tuned as customers and environments change, to optimize sales, improve value received, and respond to competitors. Some employees have no plan, or assume their plan never needs changing.

Try new things, and don’t penalize yourself for mistakes. Entrepreneurial thinking requires working outside the box, and learning from failed experiments. The focus must be on what’s right, rather than who’s right. Employees can advance their career, as well as their satisfaction, by trying new approaches, new tools, and new relationships.

There really shouldn’t be any difference between an entrepreneur and an employee, in terms of a mindset. In both cases, careers are made or broken first of all by customers and the success of the business. Both need to take risks with new opportunities, and both have to expect mistakes, and learn from them. Those who refuse to change for cause will be left behind in both cases.

I believe most business leaders now understand the benefits of the entrepreneurial mindset, and are working to build a team culture that fosters and rewards initiative, engagement, decisions, and continuous improvement. So whether you want to drive your own company, or have a thriving career in a corporate environment, you need to start acting like an entrepreneur today.

Wednesday, September 26, 2018

One of the big decisions every aspiring entrepreneur has to make is when to quit your current job to devote yourself fulltime to your new startup. Some of you are so committed to the new passion that you quit your day job early, and dedicate all your time and resources to the new venture. Others wait until the new business starts to generate revenue and profit before making the move.

Which is right? I’m definitely a proponent of the multitasked approach, since every new venture is inherently risky, and startups usually take longer to ramp up than you imagine. In my experience as a startup advisor, I find the minimum time to revenue is at least a year. Break-even and profit may not happen for a couple of years after that. And investors are hard to find in these years.

On the other hand, many investors, including billionaire entrepreneur and "Shark Tank" co-host Mark Cuban, essentially demand an all-in early approach as a pre-requisite to funding, making it clear that a total commitment is expected if you want outside money. Of course, you might be able to pay yourself a salary from the investment, but this will be minimal and critically watched.

While there is no right or wrong here, I believe there are some good arguments for not quitting your day job too soon. Here are some of the key ones I would suggest to every aspiring entrepreneur who doesn’t have a rich uncle, or isn’t sitting on a large nest egg:

Make sure this new lifestyle is really for you. I hear from aspiring entrepreneurs all the time who can’t wait to ditch the corporate lifestyle, make all their own decisions, and be in control of their destiny. Later, half of these come back to admit that their day job was not all that bad, less stressful, the work predictable, with others to lean on for hard decisions.

Current job income keeps family and creditors satisfied. The alternative of living off credit cards and borrowed money, while waiting and hoping for your startup to kick in, will drag down your motivation and kill your support system just when you need it most. Even the most successful startups can’t sustain founder salaries for the first couple of years.

Multitasking is the norm for everyone these days. With all the pushes and pulls on our lives already, adding a new startup effort as one more activity should not be seen by anyone as breaking the bank. The challenge is to keep all your priorities, personal and business, in balance. Anyone running their own business needs to learn that anyway.

Starting a company fulltime is stressful and lonely. Having another job is a good way to get the balance you need for visible accomplishments, interactions with other people, and certainly a regular paycheck. Of course, you must not short your day job, so you need the passion of your new idea to keep you energized enough to excel in both.

Keep your startup efforts “below the radar” until proven. No matter how much passion you feel for your idea, not all friends and family will be positive or accepting of the major risks and commitment involved. By maintaining your startup activities as supplementary with future payback, your efforts will look visionary rather than perilous.

Be able to learn from failure without embarrassment. Historical and current statistics still show the chances of failure on any given idea are better than even. Even with all the help resources available to entrepreneurs, there is still no better way to learn than trying an experiment that doesn’t work. Working in parallel minimizes the pain and visibility.

In my view, entrepreneurship is an endurance sport that you have to train for, rather than a quick dash to success. It pays to be able to fall back into a familiar mental role to recover, when the pressures of fund raising, new product development, and satisfying initial customers wears you down. Once those challenges start to seem like fun, you can jump full time to entrepreneurship.

I recognize that all aspiring entrepreneurs are unique, with different levels of risk tolerance, energy, and motivation. I do find that the entrepreneur lifestyle is more fulfilling for many than traditional business. Thus I encourage everyone to ignore the pundits and take a hard look at your own goals and drivers, and proceed with caution. Your happiness and legacy depend on it.

Monday, September 24, 2018

In my experience, consummate entrepreneurs tend come up with more startup ideas than they can ever implement, and some of the ideas may not even make business sense. But how does any entrepreneur know which ideas to implement, and which ones are best left behind?

After all, most great breakthroughs, like a computer in every home, seemed like a crazy idea before Steve Jobs and Bill Gates made it happen. Now we are starting to see a computer on every wrist.

That doesn’t mean that entrepreneurs should ignore business and market realities, under the assumption that success is a random phenomenon. Passion, optimism, and determination are necessary but not sufficient to assure a successful startup.

Some analysis and due diligence along the following lines should be performed on every idea, as a reality check, before committing your efforts and other people’s money to building a business:

Look for places where competitors are few. Even if the idea sounds unique to you, it’s worth your time to do a few Internet searches using relevant keywords. If you find more than a dozen solutions that loosely match your idea, it may be time to skip that one and try another. Don’t forget to consider customer alternatives, like trains versus airplanes.

Check for intellectual property barriers in your way. These days, you can find existing patents and trademarks through Google and the US Patent Office online site without spending thousands of dollars with your favorite patent attorney. Of course, existing patents don’t stop you from innovating, but charging ahead into a wall is no fun.

Find a recognized billion dollar and growing market. If you will be looking for professional investors to help you along the way, recognize that they expect to see data from credible market analysts on the size and location of your solution opportunity. Look for double-digit growth data from Nielsen, J.D. Power, Frost & Sullivan, or others.

Separate nice-to-have ideas from ones solving painful problems. All your friends may love your idea on how to find the nearest bar or gym, but how many others are willing and able to pay money for your solution? Even good social causes need to bring in revenue to continue their worthy efforts. Ask domain experts to quantify value for you.

Choose projects with financial resources within your reach. These days, you can build a new e-commerce website to sell home-made wares for a few hundred dollars. New smartphone apps cost only a few thousand, if you have the programming skills. Unless you have a rich uncle, it’s probably not smart to challenge Intel for the next computer chip, which would require several million dollars in investment.

Minimize infrastructure dependencies. Sometimes your solution is impressive, but mass acceptance requires a big culture change, a large support system, or government legislation. For example, the Segway personal vehicle was proven technology 15 years ago, but is still constrained by right-of-way laws, liability issues, and charging stations.

Availability of necessary skills and team members. Most startup projects require special skills and a motivated team. Entrepreneurs with ideas may not have access to the support skills required, or the ability to put together a motivated team. A successful startup is more about the right people and the right execution than the right idea.

Despite what you hear from some Internet spammers, there are no slam-dunk entrepreneur ideas that can make you rich with no risk and minimal effort. In fact, from painful experience, every real entrepreneur I know could probably add at least one item to this list of reality-check items. Thus I’m suggesting that you do your due diligence carefully, and pick the right idea before you start.

Sometimes I have to tell wannabe entrepreneurs that their million-dollar-idea is actually worth very little, in their own hands. It may indeed be better to freely donate your idea to a more qualified entrepreneur or team, rather than foolishly running it into the ground or sitting on it. One hundred percent of zero is still a small number.

Sunday, September 23, 2018

In a corporate environment, the focus of a job interview has long been demonstrating your match to the skills and experience outlined in the job description. In my experience with startups, that is still necessary, but not sufficient. Today’s business world has become totally customer driven, so customer-centric and people abilities really make the difference between winners and losers.

I found these required attributes outlined well in the classic book, “Customer Service the Sandler Way,” by customer care expert Anne MacKeigan. This book is focused on strategic customer support jobs in every company, but I believe the hiring rules apply equally well to every job in a startup, since customer focus has to be pervasive from the beginning in modern new companies.

As a job candidate for any highly desirable position in a startup, here are ten key attributes that will give you the winning edge over other candidates:

Bias toward action. Today’s business landscape is constantly changing, dealing with many unknowns, and the amount of data available on the Internet is overwhelming. Customers and competitors won’t wait, so every new business is looking for people who can make a decision and get things done. Talk about results, not job assignments.

Sense of personal responsibility. When problems arise in a startup, blame is a useless tool. People who can demonstrate that they take responsibility for required actions, with no excuses, are extremely valuable in any position. Show that you have done in previous jobs more than you were paid to do, without anyone watching.

An ability to step outside the process. Stepping outside the process means you need to recognize the need for a process, but also be willing to go beyond it when the process fails or is incomplete. Winning job candidates show that they have used good judgment to handle process boundary exceptions, based on a high level of customer sensitivity.

Success in building business relationships. If you don’t show your people skills during the interview, you probably won’t show them later with customers and peers. Startups know that hiring employees who build good relationships will result in higher internal morale, less burnout, and higher customer retention. Highlight your good relationships.

Tendency to question and qualify. In a startup, it’s everyone’s job to more fully understand requirements, competition, as well as customer satisfaction. In an interview, be sure to show your curiosity, ability to ask good questions, practice active listening, and the analytical ability to ferret out relevant meaning behind the data.

Persistence with tough challenges. Smart interviewers will be checking for candidates that are not resistant to hard questions, and are quick to dig deeper into situations they are not familiar with. No candidate wants to be viewed as an inflexible management challenge, or a potential turnoff to customers. Highlight your record of persistence.

Ability to quickly “read” a situation. People-smart candidates, meaning good communicators, socially intelligent, and skilled at reading body language or emotion, are invaluable on small teams as well as customer-centric activities. Things are rarely black and white. Don’t let your ego bias your reading of interviewer expectations.

Low need for approval. Candidates with this attribute are always confident and business-like, friendly but not necessarily best friends. Use examples of achievements that required initiative and determination, without orders from above, to show your ability to handle tough startup situations and customer requests with minimal support.

Strong empathy for others. This attribute is the ability to put yourself in someone else’s shoes to see what they see, and feel what they feel. When you display deep empathy toward others, their defensive energy depletes and their positive energy rises. Show how you have changed a confrontational situation to a positive and relationship-building one.

Good manners and etiquette always. Good manners are a two-sided positive tool; they not only convey respect to everyone with whom you interact, but they also command respect from those people. Good etiquette contributes to personal presence. Make sure you are really present and engaged with your interviewer, and watch your manners.

Good resumes and LinkedIn profiles may get you an interview, but they won’t get you the job, in a startup or a corporate environment. Entrepreneurs and investors have learned that success in the marketplace today is usually more about the people focus and customer focus of the team than the quality of the product. How many of these attributes can you highlight in your next interview?

Saturday, September 22, 2018

As an angel investor and a mentor to aspiring entrepreneurs, I’m always disappointed to see founders who seem stressed out most of the time, and more annoyed than energized by the abundance of challenges they see in building their startup. The entrepreneurial lifestyle is a tough one under the best of circumstances, and it’s one you have to love in order to succeed.

Obviously, it’s not that simple, but making the right first impression is critical for an entrepreneur, not just with investors, but also with partners, customers, and even yourself. Even though I’ve been working with entrepreneurs for many years, I’m sure I’m not the only person who can quickly spot the ones whose mentality for the role is suspect.

We would all prefer that aspiring entrepreneurs take a hard look in the mirror early, before they assume they can step easily into the role of a Mark Zuckerberg, Richard Branson, or Bill Gates. Here are some key mindset attributes to look for, which I believe are essential for every entrepreneur to see in themselves:

You relish the role of leading the charge. Being a visionary or an idea person is not enough; you have to be anxious to jump in and get your hands dirty. Most success stories in business are not about envisioning the next big thing, but about making that change happen. Investors and strategic partners look for entrepreneurs who can execute.

Able to balance right-brain and left-brain activities. Most technical entrepreneurs are left-brain logical thinkers, even perfectionists. Yet every business today needs a focus on visualization, creativity, relationships, and collaboration, which are normally in the domain of right-brainers. Successful and happy entrepreneurs have that rare whole-brain focus.

Enjoy being outside your comfort zone. New businesses are an adventure into the unknown. You need to be mentally prepared to enjoy the roller coaster ride, rather than face it holding your breath with your teeth gritted at every turn. Only then can you enjoy the thrill of victory when you survive a major turn, and be energized for the next one.

Proactively seek input, but make your own decisions. Great entrepreneurs seek out critical customers and industry experts, and actively listen, but are not afraid to trust their own judgment as well. Ultimately they accept the responsibility of “the buck stops here,” meaning they live by their own decisions, and never make excuses.

Willing and able to do a little bit of everything. Technology experts tend to have a very deep level of knowledge, but not very wide. If your real interests are not very broad, then building a business will likely be frustrating and expensive. Startups have limited resources, so the founders have to enjoy trying things, and learning from their mistakes.

Viewed by others as a successful problem solver. The best ideas for a new business are solutions to a real customer problem, rather than great ideas looking for a market. Creating a new business means tackling one difficult problem after another, until success suddenly appears. Entrepreneurs see problems as milestones to success, not barriers.

Don’t demand or expect immediate gratification. Seth Godin once said “The average overnight success in business takes six years,” and he is an optimist. For some entrepreneurs that success is financial, and for others it is a legacy of good deeds. Because it takes so long to get there, it is important to be happy with the journey.

I’m not suggesting that you need to fit every aspect of my view of an entrepreneur’s mentality for success. Certainly there are winning businesses run by people from every background and personal style. But if you are looking for investors, team members, and demanding customers, it helps to understand what their biases might be in committing to and helping the ideal partner.

I do believe that if every aspiring entrepreneur spent at least as much effort looking inward, understanding their own drivers and preparing, as they do in working outward by building solutions, seeking investors, and writing business plans, the startup success rate would go up.

Overall, the entrepreneur mentality is a state of mind that enjoys the activities and requirements of starting a business. Happiness is more likely to lead to success, than success leads to happiness. Are you certain that your desire and expectations of being an entrepreneur are being driven by the right perceptions?

Friday, September 21, 2018

If you are one of the thousands of entrepreneurs who need equity funding to get your startup going (no loans to repay), you are probably overwhelmed at the prospect of finding, contacting and pitching to the huge number of qualified angels and investment groups around the country. I recommend an easier way – using an investment platform like Gust, EquityNet or SeedInvest.

These are not a substitute for personal contact with investors you know, or your rich uncle. But they can otherwise save you much time and effort, and are also safer and more productive than the old-fashioned approach of broadcast emailing or cold-calling every investor you can find in online directories, or responding to the risky spam offers you get for funding on social media.

Another advantage of online investor and equity crowdfunding platforms is that they will force you to pull together your story and documentation in a more consistent and complete fashion than you might otherwise bother. In my years of advising startups, and also as an occasional angel investor, I still recommend this set of best practices to prepare you for platform applications:

Formalize a business entity immediately. Startups that have a name but are not incorporated have no credible basis for an equity investment. It’s easy and inexpensive to create an LLC, S-Corp, or even a C-Corp online these days, with or without the help of an attorney. The type can always be changed in the future to meet investor requirements.

Register Internet and social media startup names. Reserving a consistent website domain name and social media names will not likely be possible once your startup is made public via an investment platform. The names you select will set the tone for investors, and are a key element in the investor or crowdfunding user decision process.

File a provisional patent or other intellectual property. Having a defensible barrier to entry is a clear advantage to attracting investors, and another element that cannot be added after your design is made public. Intellectual property is also a clear differentiator from your competitors, and indicates a serious commitment rather than testing the water.

Recruit a team with complementary skills. Most solo entrepreneurs can’t show the range of experience or skills to build a winning business alone. You need to be able to highlight the synergy of team members who have the necessary technical, financial, marketing, and operational credentials to move your startup ahead of the crowd.

Prepare a slide deck to highlight product and business. This pitch will be required by every platform, and it needs your effort and focus before the crush of all the other fundraising tasks. I recommend that you start by creating an “elevator pitch,” then an executive summary, and begin work on your business plan and financial model.

Solidify your passion with a prototype product or solution. First impressions are key, so maximize your credibility by providing videos of a prototype or minimum viable product (MVP). Most crowdfunding candidates or investors need pictures as well as words to see the full potential of your proposal, and commit real money for a percentage of your equity.

Collect target customer testimonials and advocacy. Potential investors want to see quotes and names as evidence that someone other than you and your family believes in the solution, and is willing to provide a letter of intent, or at least strong support. Market research from credible third parties, such as Gartner Group, is also critical to success.

Pick a platform that fits your business model or industry. For example, some sites can be easily searched for enterprise startups, such as AngelList, while others, like CrowdFunder, tend to highlight consumer products. Many crowdfunding platforms are not used for business solutions, or even multi-million dollar requests for consumer startups.

In all cases, getting the funding you need will not happen just because you get listed on a platform. It still requires thorough preparation and intensive promotion to get the attention of the crowd and professional investors. The overall success rate is still less than ten percent, so do your homework first, and all the right people will see your equity as the key to their legacy as well.

Wednesday, September 19, 2018

In big business, as well as startups, I have found that your effectiveness can be highly correlated to your ability to build and maintain people relationships, often more so than hard work, or how many hours you give. But all relationships are not the same, and your ability to distinguish between positive and negative, or casual versus committed, can make or break your future.

I find that the most successful entrepreneurs have mastered the art and skill of building and managing relationships. For example, we all know people who really believe that everyone in the world is their supporter, when in fact many are actively working against them. The reasons may be emotional or fact based, but the key is understanding and dealing with relationship realities.

In my role as a mentor to business professionals and entrepreneurs over the years, I have found that it’s important to take a hard look at the relationships around you on a regular basis. If you have very few, or the wrong relationships, or your assessment abilities need tuning, your impact and your career may be limited. But, like most other skills, you can learn from these priorities:

Everyone benefits from active mentoring. The most productive business relationships involve mentoring, or active sharing of knowledge and experience, with the intent to improve communication, cooperation, and impact. This is a powerful and positive relationship that benefits both careers, as well as the business.

It works at all levels inside an organization, as well as outside the company. Most successful entrepreneurs and business executives admit to having mentor relationships, including Bill Gates with Warren Buffett, and Mark Zuckerberg with Steve Jobs. We all have our strengths and weaknesses, and can benefit from an external perspective.

Provide and seek coach and advocate relationships. The best coaches are people who care about you as a person, without any ulterior motives, and intend to inspire you to be the best that you can be. With their advocacy and guidance, your morale, skills, and thus productivity will go up, benefiting both the company and your career.

A good coach is not a critic. Beware of relationships with people who constantly put you down, highlight your flaws, or discuss your shortcomings with other team members.

Establish relationships with people in the know. Some peers are always researching the big picture and latest details, and can keep you in the loop on what’s happening in the organization and why. I’m not talking about gossip or negative information, but positive insights that will help you spend your time to the best advantage in your career.

These people are easy to recognize if you keep your eyes and ears open. They typically share insights early that prove to be productive, and have good relationships themselves with executives and other leaders.

Actively court relationships with people you aspire to be. If your friends are all people in lesser experience, it's unlikely that you can learn new things from them. Supplement the scope of your relationships with trailblazers you respect, to be inspired by their results, and motivated to follow in their footsteps. Keep your ego in check.

Expand work relationships into personal friendships. Personal friendships between peers is always good for business, even between managers and team members. Personal friendships will improve communications and trust, and will definitely improve your personal satisfaction and life balance, between work and play. .

Make it a point to get to know other teams and customers. Just knowing more people both inside and outside your organization, if only as acquaintances, is still a good thing. It keeps you from becoming isolated in your views, improves trust all around, and generally leads to more cooperation and sharing. Even with all our technology, business is still people-to-people.

Above all else, don’t create enemy relationships. Things change rapidly in business, and enemies have a way of resurfacing in a position to damage your career or your project. Don't burn your bridges with anyone on the team, and use your initiative to engage people directly to improve communications, rather than cutting them off or instigating a personal battle.

In my experience, even the best technology and business model can’t succeed without positive relationships all around on the team. As an angel investor, I learned this the hard way, and now I’m a believer that smart investors invest in people with the right relationships, not just ideas and skills. Work to make your ability to manage relationships your sustainable competitive advantage.

Monday, September 17, 2018

A common request I hear from aspiring entrepreneurs is for an assessment of their latest idea. I don’t even try to assess things at the idea level, since I can’t read minds. I can assess execution plans, if you have any. Yet I believe that business success is more a function of the person than the idea or the plan, so the best idea is one that is a best fit for you, and only you can assess that.

The best new idea for any entrepreneur should first be based on their own personal interests, skills, and lifestyle, rather than the characteristics of a given market or technology. I found some great insights along these lines in the classic book “Find Your Balance Point,” by renowned executive business coach Brian Tracy, and work-life balance therapist Christina Stein.

They emphasize, and I agree, that true success and satisfaction is most likely to happen when all your actions and choices are guided by a profound adherence to your deepest personal values, vision, purpose, and goals. Here are seven key considerations for how you should make your own best entrepreneur business idea decision in this context:

Pick something you really enjoy doing. If your passion is social change or sustainability, with financial value creation further down in priority, you should choose to be a social entrepreneur. Don’t pick a technology idea that someone else believes will make you rich and famous, or a business area you are not intimately familiar with.

The idea or technology was easy for you to learn. If you feel an idea was born inside you without thought or effort, or you learned the details easily, it’s a great idea for you. The next step is to do homework on the business issues that are common to all ideas, such as market size, business models, and marketing. Then ask me about execution.

You look forward to learning and contributing more. Every new idea is only the beginning of a long journey, and the actions you take along the way will determine your ultimate success and satisfaction. You need to enjoy the learning along the way, as well as the destination. If all you see ahead is stress and pain, look for another idea.

When engrossed with this idea, the hours fly by. The best and most successful entrepreneurs, such as Elon Musk, known for PayPal, SpaceX, and Tesla Motors, routinely work hundred-hour weeks, but never complain about the hours, and don’t even think of their activities as work. He doesn’t need or ask anyone to assess his ideas.

Working on this idea gives you renewed energy. Everyone develops a sense of what activities build their energy, and which ones drain energy from them. As an introvert, I lose energy quickly working a room full of people, while my extrovert friends come away from a social gathering more fully energized. Find ideas that energize you.

You continually strive to sell and communicate the value. Smart entrepreneurs develop quick elevator pitches for their ideas, good product and business stories, and are eager for the opportunity to communicate and learn from feedback.As an investor, I’m not attracted to startups where the founder sends in a marketing person to do the talking.

You love to associate with the top people in the business area. The best ideas are ones that get attention from experts and key constituents in relevant business areas. Part of the satisfaction of being an entrepreneur is being able to interact with and learn from the people you respect most. Test your ideas on them, and listen to the answers.

Finding the balance point in your life’s work is not an easy task, but it is critical to long-term success and happiness. Establishing the right professional identity and commensurate business is equal in importance to maintaining your health and finding the right personal relationships and family life. You can never satisfy everyone, so you need to start by satisfying yourself.

So before you poll the world on what they think of your next great idea, be sure you assess your own drivers along the lines listed here. If everything fits, build a plan to make it a business. If you can’t build a plan, or your advisors and investors find it unconvincing, it’s time to give that idea to someone else and try a new one. I see more than enough great ideas to match any entrepreneur.

Sunday, September 16, 2018

Young entrepreneurs often are so excited by new technology or their latest invention that they forget to translate it into a value proposition that their customers or potential investors can understand and relate to. They become frustrated with investors, senior executives, and even customers who don’t seem to “get it,” with the result that everyone loses.

Senior business leaders, for example, are unlikely to relate when you pitch your latest web app, highlighting the mashup technology, which you derived from early online social networking applications. Mashup probably reminds senior leaders of a train wreck, and social networking is still seen by some business executives as a frivolous waste of time.

It’s really your responsibility and your advantage to translate your message into values and priorities that the intended receiver can readily relate to and understand. Here are some key value propositions that will resonate with every business leader I know:

Ability to adapt quickly to changing requirements. Every business leader knows how difficult it is to keep up with a changing market. If you can quickly explain how mashup technology facilities this agility challenge, the technology may quickly turn from a negative to a major positive. This priority applies to big companies, as well as startups.

Customer data integrity and security. Customer data, as well as internal data, is a key resource for every business that must be secured and protected. If your message starts with a focus on this priority and related costs, the technology will likely be appreciated and valued, rather than challenged.

Personal privacy protection. Customers are always looking for a better user experience, and they don’t want their privacy compromised. Before you focus a senior decision maker on your new cloud technology and distributed data, make sure he or she understands how it will lower user privacy exposures, rather than increase them.

Reduce litigation risks and support costs. Often new technologies are seen by senior decision makers as new opportunities for litigation and hackers. You need to address these concerns early, by highlighting patents, encryption capability, or other features which mitigate these risks and costs. Skip the acronyms and implementation details.

Payback on investment. Every business executive wants to understand how each new investment in technology relates to their bottom line. Quantifying the return on investment (ROI) is “top of mind” for every investor and executive. Entrepreneurs who make this case effectively will get the decision they want, no matter how esoteric their technology.

Ability to integrate with existing apps. New applications which can’t communicate with existing data and applications are often more of a problem than a solution. Mashup technology may be your biggest plus, if you position it in this context. Highlight the mashup use of existing friendly interfaces, and use of existing data in a new solution.

I challenge every entrepreneur to see how many of these priorities they can integrate into their new technology solution elevator pitch. You may be able to turn a potential train wreck into a win-win decision for both you and the investor or customer. In any case, it pays to do your homework on the background and experience of the decision maker you face. Don’t assume their understanding of technology is commensurate with yours.

Entrepreneurs need to remember that every investment decision, whether by professional investors or customer executives, is primarily a financial decision, not a technology decision, driven by limited funds. If you can translate your technology power into a solution satisfying key business goals, you will win the investors you need, as well as the customers you need to make your startup a success.

Saturday, September 15, 2018

Many entrepreneurs are so enamored with their product vision that they believe their own hype, and are convinced that the market for their solution is so huge that no one will ask them for independent market research data. They don’t realize that business projections with no third-party validation have no credibility with investors, and smart potential investors will walk away.

Every good business plan needs an early section which sizes the total market opportunity, and then breaks down that total into the most relevant segments for your focus. If ten percent of these numbers, multiplied by your average product price, will get you the revenue you need to scale your business, you will get the love you need from angel and venture capital investors.

A common excuse I hear from entrepreneurs for not doing the work is that real market research takes too much time, and costs too much money. Perhaps that was once true, but in this age of the worldwide Internet, big data, and pervasive business intelligence in every industry, you can use the following steps to get the data you need with very little time and cost:

Start your research with Google. Use your favorite search engine and keywords describing your solution to find online sales reports, trade association statistics, and online newsletters with the latest statistics. The wealth of data available online is already much larger than the entire Library of Congress, and much more current.

Modern libraries are still worth a visit. Universities and large municipalities still maintain subscriptions to the latest market research reports from key sources, including Nielsen, International Data Corporation, and Gartner Group. In most cases, these are available to the public for free access, and can be referenced and footnoted in your plan.

Explore municipal development resources. The local Small Business Association (SBA) offices, or their equivalent in other countries, can often provide market statistics on key market domains in your area. New business development specialists there can also provide good additional sources for the specific information you may need.

Browse the business section of your favorite bookstore. These days, it’s a great way to get some work done, while enjoying a cup of coffee, so you may not even have to buy a book. Pay particular attention to the titles discussing the latest issues having big opportunities, like alternative energy, global warming, and technology trends.

Peruse company reports from your business domain. Competitor annual reports, white papers, press releases, and presentations are great sources of data and trends that you can use to support your own efforts. These are also important for your product positioning in the competitor section of your business plan.

Conduct your own customized market research. With social media and the new survey tools, it’s easy and fast to set up and run your own focus group, or opinion survey. Just make sure your results are statistically significant, rather than anecdotal, and avoid any personal biases in the questions which may be used against you.

You need to find just enough information to quantify the real need out there for your product or service. For example, if you are offering an accounting service for small business owners, you would want to quantify the number of enterprises in your area, with the size, age, and spending demographics that you are targeting.

Buying large detailed reports from market research freelancers and name-brand providers usually costs several thousand dollars, and often is not required to find the summary data you need to satisfy investors. One of the free sources above, or just the teaser data from an online report advertisement, often is more than adequate as a third-party reference for credibility.

We all know that people can use statistics to prove any point they want, but not having any opportunity sizing is certain to raise a red flag above your whole business plan. On the other hand, spending your entire startup budget on market research won’t improve your odds of success or funding.

Successful entrepreneurs get the job done quickly, without breaking the bank.

Friday, September 14, 2018

Technology is so key to every business these days that experienced business-smart but non-tech entrepreneurs are feeling deeper and deeper in the hole. Even if they realize that they need real technical strength at the top, they are not sure how to attract and select the talent and expertise they really need. Should they go after high-tech nerds for partners, or professional technologists?

The right answer for a good business partner today is neither of the above. Startups succeed most often when the founding partners know how to build and run a business, rather than how to build and run technology. Only one component of running a business is managing technology, but it is a critical component, so no entrepreneur can afford to ignore it or totally delegate it.

That means every entrepreneur needs to learn how to attract, hire, and manage technical people for their team. Just like you don’t have to be a financial guru to recognize a good CFO, or a marketing genius to hire a VP of Marketing, you can find the right technical partner or team member by using the right evaluation and hiring steps, including the following:

Engage a technical advisor to assist with recruiting and early interviews. Just like executive recruiters recognize the best executives, a technical expert in your business domain will recognize the right combination of skill, creativity, and experience you need for a co-founder or key team member. Don’t fall for a technical pitch you can’t fathom.

Look for a match in culture and values, as well as technical strength. A great technical LinkedIn profile is a good start, but not enough to assure success in your environment. The non-technical leadership attributes of excellent communication skills, high integrity, passion, and perseverance are critical for the success of the whole team.

Spend time informally with candidate peers and former employers. This approach works best with business associates that know you, or peers that you meet at industry conferences, or technical gurus that have no business connections to the candidate. Former employers will normally only give you candidate employment dates or good news.

Let candidates educate you on attributes you need and they bring. The key here is to do more listening than talking in both formal and informal interviews. I find that many entrepreneurs are so passionate about their own idea that they can’t stop selling it to potential partners. They are attracted to people who agree, but may not be able to help.

Evaluate their problem-solving ability in the context of your business. A business startup is not an academic environment, or a big company research organization. Practical problem solving, and communicating to business people, is often a big challenge for technical experts. Test them with problems outside their comfort zone.

Challenge current team members to bring in the best and the brightest. Start with existing co-founders, extend the request to advisors and investors, and finally to existing team members. Make them part of the interview and decision process, since they all have a large stake in ultimate success of the new venture.

Continually ramp up your own technical competence. Although technology is getting more pervasive in business, it’s not rocket science. If your kids can use computers by age six, every entrepreneur ought to be able to stay current with the latest social media marketing and e-commerce technologies. You can’t manage a technical team or negotiate with technical partners without understanding their view of the business.

For non-core technical strength, look for outside partners. Outsourcing to expert freelancers or business partners is often a better solution for startups than managing everyone into the inside team. You may not have the breadth of technical challenge, or the budget, to lure in and keep motivated the caliber of technical expert you need.

Even if your company doesn’t sell high-tech products, like Zappos sells shoes, having and using the right technology in the business, for distribution, marketing, and customer support, can easily make the difference between winning and losing in today’s high-tech world. It’s no anomaly that Zappos CEO Tony Hsieh graduated from Harvard with a degree in computer science.

On the other hand, there are many technology companies successfully started and run by non-technologists. For example, Richard Branson, CEO of Virgin Group, with no technical background at all, has started and run many technical companies, including the futuristic Spaceship One and an orbital space launch system, and reportedly does his own social media work.

Thus non-technical entrepreneurs must not shy away from technical issues, and must also learn to find and effectively work with technical partners, inside their company and outside. Street-smart today means the ability to survive and prosper in a technical world. Are you there?

Wednesday, September 12, 2018

Before you start down the long hard road of an entrepreneur, it pays to look inside yourself to see what you love to do, and what would fit your definition of success. For some, it’s all about the chance to run your own show, or advance a cause that you are passionate about. Others dream of being a billionaire, or proving that they can satisfy a need by starting and growing a business.

In my experience, you will have the most satisfaction and success if you can combine a strong sense of “purpose” with a quantifiable business opportunity. Some founders are so passionate about their cause that ignore the business realities, while others are so driven by money that they sacrifice their ethics. Both ends of this spectrum will likely result in more long-term pain than fun.

One example of a startup with a good balance seems to be Whole Foods, whose focus on healthy foods and a sustainable environment is legendary, yet their business success recently attracted Amazon with a $13.7 billion buyout. On the other hand, I worked with an entrepreneur who really wanted to cure world hunger, but forgot that hungry people rarely have any money.

The challenge is to do the right homework and ask yourself the right questions to find a personal purpose and a business model that are complementary, and will likely provide you with a good shot at business success as well as personal satisfaction. Here are some key steps I recommend to get you started on the right foot:

Identify a “higher purpose” that embodies your passion. Do you feel strongly about a social or environmental issue where you would love to make an impact as part of your legacy? Keys to this would be something that matches your values, and could benefit from your strengths. Write it down and validate it though friends and social media.

Set some specific goals and milestones for a business. Setting a business goal requires the conceptualization of an idea into structured deliverables, and formalizing that idea into one to five specifics. Ideally, that formalization is the start of a business plan. It’s hard to know when you have arrived, if you have never figured out where you are going.

Start networking to pull together a complementary team. Contrary to a popular myth, entrepreneurship is not a solo lifestyle. We all have strengths and weaknesses, so we need people around us who can fill in the gaps. Your ability to motivate other people along the lines of your passion will dictate future success, as well as satisfaction.

Define your target customer set and value proposition. Without customers, there is no business, and no higher purpose can be satisfied. If you can envision and size a set of customers that will be delighted with the value you bring, in concert with your higher purpose, then you are well on your way to an entrepreneur lifestyle that you will love.

Look beyond today to your long-term career aspirations. Even entrepreneurs need to think about their career. Some are perennial “startup” people, who can’t wait to hand off a successful creation to a business professional, and start the whole process over again with another idea. Others, like Bill Gates, want to run a great company as their purpose.

Solidify your values and expectations for workplace culture. In today’s environment, the workplace culture you crave is a key factor in the type of business you will fit. Every businesses requires a high level of employee engagement, as well as customer-sensitive processes. Be sure you understand the issues of remote workers and global operations.

Contemplating these steps should convince you that identifying your sweet spot in the entrepreneurial spectrum is not a simple exercise. It requires deep introspection, and making some hard choices. These can be painful now, but I assure you they will be more painful if ignored or pushed into the future. It’s better to decide now if being an entrepreneur is not for you.

Timing is everything. You may decide to start now, or take some time to build your skills and your experiences, as well as resources, for a later entrepreneurial effort. There is no right or wrong time to start. I see successful entrepreneurs who started in their teens, like Mark Zuckerberg, and others, including Colonel Sanders, waited until well after some more conventional business roles.

The great thing about being an entrepreneur is that you can shape the business to be more you, rather than let the employee role in a corporation drive you to be someone you don’t even like. It’s up to you. Take control of your destiny today.

Monday, September 10, 2018

I always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. You need to find the skills or experience you don’t have in business, technology, or money. So the first question I usually get is what percent of the company or equity is that person worth? Giving a co-founder a salary won’t get you the “fire in the belly” you want.

The default answer, to keep peace in the family, is to split everything equally, but that’s a terrible answer, since now no one is in control, and startups need a clear leader. The next default of waiting until later is equally bad, since partners who bow out early will still expect an equal share of that first billion you make later.

Now comes the reality check. Just because it was your idea doesn’t mean you “deserve” 90% of the equity. The value in a startup is all about tangible results, so I see no equity value in the idea alone. Thus the real discussion must start with who will be doing the work, providing the funding, and delivering results. Each co-founder should get equity for value, based on these key variables:

Lived a key role in a previous startup. Building a new business is quite different from an executive role in a mature company, so people from these backgrounds are often a liability. Value is embodied in previous success with investors, proven problem solving ability, and having built and executed a business plan with minimal resources.

Experience and connections in your business area. Textbook knowledge and academic degrees don’t count here. Value factors include your related product breadth and depth, relationships with thought leaders, key vendors, and large potential customers. Building the product may be the easy part of your startup challenge.

Key to required patents or trade secrets. In many cases, one of the co-founders may bring some work in progress that can be patented, trademarked, or copyrighted. Your idea is not intellectual property yet, so it has no inherent value. Every previous experience filing and winning a patent is a rare and valuable asset.

Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. Less dependence or startup success, or more cash compensation, generally means less equity assigned.

Amount of venture funding provided. Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. The challenge is for real co-founders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

If none of these five items is a clear differentiator in your case, a logical approach would be to assign each an equal weight of 20% of the total, and partition the total equity based on each co-founder’s correlation to each variable. A friend or family investor thus might get 20% of the equity, even with no business activity contribution.

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. That way, if one of the partners disappears, or their role changes, a portion of the equity can be re-captured and reallocated to the other members. Other common terms, like the right to re-purchase, should be investigated.

In all cases, roles and titles should be clear, but not necessarily tied to any given percent of equity. In other words, the CEO need not be top equity owner, but should be the one with the most business skill and experience. The CTO of many technical startups was the original founder. The CFO may have a major financial background, but might be a minority owner.

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly. Naïve cofounders have found themselves squeezed out in some well-known cases, including Facebook.

But don’t get greedy. It’s the power of the team that makes the business. Major equity in a startup that goes nowhere is not my idea of fun.

Sunday, September 9, 2018

In today’s totally interconnected world with its abundance of information, choices, and marketing, how your customers buy has drastically changed. Buying has evolved from a simple transaction decision to multi-faceted experience. Whether you are an executive, an entrepreneur, a marketer, or a salesperson, it’s time to look beyond how you sell, and focus on how your customers buy.

For example, you may think that buying a commodity like bottled water is still all about price, yet buyers today check their smartphones first for positive brand reviews, environmentally friendly bottles, positive buzz from social media, and the nearest outlet for purchasing. Think about how much Starbucks customers have changed what you need to consider to sell a cup of coffee.

I found a good outline of the key elements involved in today’s customer buying experience in a new book, “How Customers Buy…& Why They Don’t,” by Martyn R. Lewis. With his two decades of experience as an entrepreneur and a sales and marketing consultant across a broad range of businesses, he has some good insights on what works with customers today, and what doesn’t.

In my own recent experiences advising small business owners and entrepreneurs, I have seen the same six elements of the customer buying journey many times, especially as they relate to selling in consumer environments:

First you need a trigger to start the buying journey. You may believe your product or service is very attractive, but you won’t get a customer until someone decides to act on an unsatisfied need. These days, that trigger is much more likely to come from a friend’s experience, social media, or a memorable website, rather than conventional advertising.

Understand all steps required to complete the experience. The sales steps may seem simple to you, but customers today are quick to abort if they get confused, encounter redundancy, or the process takes longer than expected. Make sure you listen carefully to online feedback and reviews, and personally check competitor’s processes.

How many times have you been frustrated, or even given up, on businesses that make returns and exchanges more complex than competitors, or can’t handle transactions and discounts quickly? The bar is constantly moving up, so don’t get caught at the bottom.

Target the key players in the buy decision and process. In the world of Millennials, parents may be doing the buying, but the kids are driving the decisions. In business, buying decisions are now often made by a network of highly connected individuals across a virtual world through instant messaging. Target the players as well as the process.

Market to the dominant buying style of your customer. On one end of the spectrum, people now buy solutions, rather than products. On the other end, many people look for personalized choices, versus value received. There is no right or wrong buying style, and it’s up to you to market and sell according to the style of your target market demographic.

For example, some customer segments prefer the one-size-fits-all approach, for speed and simplicity, while others want the solution to be customized for them, even if it costs more. You need to constantly talk to your target demographic and adapt to their style.

Capitalize on key value drivers that motivate your buyer. The value drivers have to be sufficiently compelling to your customers to outweigh the costs, risks, and change associated with completing the buying process and using your offering. I see an increase in social drivers, including peer pressure, prestige, or environmental impact. Play to them.

Eliminate buying concerns that can slow or stop the sale. These are the opposite of value drivers. Concerns might include complexity of the process, priority of the need, decision scope required, implications of the solution, and many more. It’s up to you to anticipate and alleviate these concerns in your marketing before they even come up.

For example, in recent surveys, over 50 percent of online shoppers have admitted to abandoning their carts, causing you lost revenue, at least once in the last three months. Most of the reasons given could be fixed purely through simple design changes.

From a big picture standpoint, what you need today is a market engagement strategy, rather than just the traditional sales funnel that focuses on completing transactions. Your selling process has to harmonize with how the market is buying, or tackle the more difficult challenge of changing how the market buys.

Engaging your market is eminently doable with the online and social tools available today, but it takes effort and change on your part to meet your customers, rather than wait forever for them to meet you. It’s time to get started today.

Saturday, September 8, 2018

Every inventor seems to think their invention is worth a million dollars, but I haven’t seen anyone pay that much for one yet. In fact, I often have to tell aspiring entrepreneurs that their inventions have zero value, at least not until they are put in the context of a business plan, with qualified people committed to executing the plan. Early-stage ideas fall in the same category.

Don’t get me wrong. I have the greatest respect for inventors and idea people, who think outside the box to envision and even create solutions never before seen. But I have also learned from experience that there is often quite a distance between a great invention and a great business. A business is about making money, while inventions are more about spending money.

According to an old Harvard Business Review article, many people in history, famous for their inventions, like Thomas Edison, were entrepreneurs who only later were remembered as inventors of the products they commercialized. In fact, entrepreneurs will always tell you that the invention was the easy part, and building an innovative business was the real challenge.

Of course it helps to have innovative technologies before you start building a business. In other words, inventions are necessary but not sufficient to create real value for investors and customers. So what do investors look for in qualifying you for that million dollars you need to take your invention from your garage to the market? Here are some reality checks you should apply:

It takes a business team to build a business. If you have been working alone, perfecting your idea, with no new business track record, your best strategy is to license the technology to a company or team with real business startup experience. You may get that million dollars someday in future royalty payments, but don’t expect anything today.

Commercialization requires infrastructure. Many great technology solutions, like hydrogen engines for cars, look great on paper, but are extremely difficult to make a business. The value is tied to infrastructure outside your control, such as a pervasive network of fuel stations, trained service facilities, and new government regulations.

You need a viable business model and customers. Investors expect proof that your invention can be manufactured in volume, and can justify a sales price at least double the cost, to a large customer set that has money to spend. I see too many technology solutions to world hunger, where constituencies don’t have money to sustain a business.

Take a hard look at the alternatives. Just because your technology is “cool” doesn’t mean that it solves a painful problem that customers are willing to pay for. People like to complain about global warming and the plastics pollution problem, but they may not be ready to buy alternative energy at twice the price, or change bad habits for global gain.

Lock in your sustainable advantage. Technology limited to a single product is seldom enough for a business. A long-term advantage usually also requires intellectual property, such as a patent, trade secret, or trademark. Investors look for technologies that can spawn a family of products, rolled out over time, for continuous innovation.

Experts and market research agree you are first. Just because you haven’t heard of anything like your invention, doesn’t mean you are ahead of the pack. Even a patent search won’t uncover work in progress that may be well ahead of you in the business cycle. Test your idea with experts, scientific journals, and trade publications.

Truly disruptive technologies carry an extra burden. Investors realize that big changes in technology usually take a long time, several false starts, and more money than expected to commercialize. They, and most customers, really are quicker to adopt evolutionary rather than revolutionary products. Early adopters are not a big market.

Ultimately you need to remember that customers buy solutions to problems from business people they trust – they don’t buy technology from inventors. If you really want your invention to change the world, maybe it’s time to give it to a proven entrepreneur, and split the ownership of a new company. The million dollars will come in due time.

Friday, September 7, 2018

A critical stage for most first-time entrepreneurs is getting their idea developed into at least a prototype to validate their technology. This process costs money, which professional investors are not willing to contribute, since their interest is in scaling a proven product and business model into a growth business. Investors want potential for a large and timely return, with reduced risk.

Acquiring seed-stage funding is admittedly tough, but a source that I find often overlooked is government grant funding, accessible in the U.S. through Grants.gov, an online directory of more than 1,000 federal grant programs that don’t look for equity or payback. Specifically, I often point to the NSF or the Small Business Innovation Research (SBIR) program for high-tech startups.

Government grants start as small a few thousand dollars, but can provide a million dollars or more in capital to new ventures. But before you conclude that your funding problems can be easily solved with grant applications, you should consider the direct and indirect costs of this approach:

Applications are complex and labor-intensive. Many grants require special expertise and background knowledge, which will take time and people away from the thousands of other tasks required to get your business going. You should expect that a winning grant application, with all the reviews and required certifications, can take months of work.

The approval process is long and bureaucratic. For grants, you are often tied to pre-defined government application and approval schedules, perhaps once or twice a year, which may not coincide with your needs. The resulting delays can give your competitors an edge, or the market requirements can change before you get the funding you need.

Experts are available to help, but fees are high. There are professionals who specialize in grant applications, and they may even have relationships with key decision makers in the approval process, but they do cost money that you may not. You need to make an ROI assessment of value versus cost on outside help at this stage.

Detailed grant accounting requirements. All grants require a detailed accounting of every dollar spent, and adherence to guidelines. This may go beyond your normal capabilities at this stage of your business, but be aware that violations can result in loss of funding, or even stiffer penalties. Expect regular audits of your project and spending.

Also, it’s important that you understand just how the SBIR program works. Overall it is structured in three phases:

In Phase I, you can be awarded up to $150,000 for six months. This award is intended to allow you to establish the technical merit, feasibility, and commercial potential of the proposed R&D efforts and to allow them to determine the quality of your organization before additional awards are considered.

In Phase II, amounts up to a million dollars over a two year period awarded. This phase is intended to allow you to complete the research and development on your innovative product.

Phase III is all about helping you take your innovation to market, or commercialize it. While the SBIR does not provide direct funding in Phase III, funding can often be acquired through referred Federal agencies, like the Department of Defense, who may intend to use the innovation once the development is complete.

All you have to do to qualify for government grant consideration is pass the initial eligibility test:

At least 51 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States.

Be a small business of no more than 500 employees, including affiliates, located in the United States, and organized for profit.

In any case, I do recommend that you don’t try the grant process alone the first time. If you still have any connections at the local university, look for some guidance there from related subject-matter professors. Professors live on grants for research, but they need you for a current focus on commercialization. Another alternative is to find an inexpensive class on grant writing.

Of course, for speed to market, and to retain maximum control of your innovation, it’s always better to fund the R&D stage of your business yourself. Then seek angel investors or crowdfunding, as required, for the rollout, and venture capital for scaling the business across multiple geographies.

The best entrepreneurs I know don’t let initial funding constraints discourage them from starting. They don’t overlook any of the many sources out there, including government grants, but they do it with their eyes open, and get the help they need along the way. It’s time to get started today.

Wednesday, September 5, 2018

Every entrepreneur I meet in my role as a small business advisor dreams of making the business run like clockwork, even without them. You are all frustrated when that never happens, even after years of 16-hour days, repeated efforts to hire the right people, and multiple campaigns to delegate more and sign up for less. There is no time for fun, and vacations never happen.

For example, Elon Musk, while being a highly respected and successful entrepreneur for years, still readily admits to regular 100-hour work weeks, no social life, and sleeping under his desk all too often in the Tesla factory. Is this the definition of success you want to experience? Frankly, I’ve never been sure what to tell entrepreneurs who want to break free of these bonds.

Recently, I completed a new book, “Clockwork: Design Your Business to Run Itself,” by Mike Michalowicz, that really helped me pull my own thoughts and recommendations together for the beleaguered business owners I try to help. Mike uses his own experience as a recovering workaholic building two multimillion-dollar companies to net out seven steps in his transformation.

I’ll paraphrase his key points here, based on my own experience in large and small businesses, and input from the entrepreneurs I have worked with over the years:

Track where your time is actually being spent today. As business owners, you all have to balance getting work done (doing), making decisions (deciding), managing people (delegating), and constant improvement (designing). Only then can you start to adjust your time and your company to let it run without your constant involvement.

For example, I was on the Advisory Board of a small company whose founder was killing his health through overwork, even though he felt high focused. After some honest tracking efforts, he realized that he was still involved in every detail of daily activities.

Identify a single key function to your company’s success. Within every company there exists a core function that embodies the uniqueness and value that you bring to the table. It is where your offering meets the best talents of you and your team. Make sure you focus your design efforts on this area, and delegate or cut time spent on all the rest.

Empower the team to ensure your core function is fulfilled. In a highly efficient business, everyone knows that the core function is always the priority, and controls are in place so that the people and resources who serve it are protected. Also you need to make sure that highly skilled key people are not diluted by unfulfilling routine work.

For example, I once worked for a company whose core competency was computer hardware. Someone decided to initiate a software arm to grow the business, so key executives and skilled resources were re-allocated to start a software project. The result was a big hit to the hardware business, as well as an unsuccessful software business.

Document required systems for repeatability without you. Each of us as a team member or entrepreneur has our way of executing various tasks, but often these get left undocumented and non-transferrable without our continuous involvement. It’s easier to use screen-captures and notes on existing processes, rather than write detailed manuals.

Adjust roles and shift resources for optimal performance. To get maximum business autonomy, you need to match the inherent strength traits of employees to key jobs, always adjusting for market change and people growth. Have the right people do the right things at the right time. Use mentoring to help people develop as your business develops.

In one of my own positions as an executive in IBM, I found that putting a high-potential employee on my own staff for a few weeks was more effective, both short-term and long-term, in gaining me some work relief than any training class I could imagine.

Focus on satisfying your ideal and best customers. The more services you provide to a wider mix of customers, the more variability you have, and the harder it becomes to provide extraordinary and consistent services. Make sure your team knows that all customers are not the same, and how to provide memorable experiences to the key set.

Free yourself from the need to always be at work. Your ideal business is one that delivers consistent results, including growth goals, without your active involvement. The final step is to create a business “dashboard” that enables you, and everyone else there, to stay on top of the business from anywhere.

The final big hurdle to overcome is you. I find that many entrepreneurs can’t get over their ego, or their fears, that the business can’t operate without them. Some are just stuck. Let me assure you that your best path to business success, as well as your personal satisfaction, is to work on making your business work without you, rather than working harder on the business.